* Good ethics is good business

Business management studies over the years have shown that between 65% and 75% of all managers will face major ethical dilemmas (e.g. situations in which knowing what the ‘right thing’ to do may not be clear or certain) in the course of their careers. An important indicator of the alternative investment industry’s maturation and development is its embrace of formalised expressions of ethical behavior.

Horizon Cash Management's survey (2006) reveals that 84% of respondent firms have a written Code of Ethics and/or Code of Conduct. A like-minded number (85%) maintain a Policies and Procedures Manual. Importantly, rather than existing merely as an internal document, each is highly likely to be shared with investors.

While it’s a truism that ‘good ethics is good business’, the survey provided significant evidence that investors have enormous influence in helping hedge fund firms shape their ‘best practices’. Eighty percent of respondents stated that their investors believe it to be ‘important or very important’ that the firm’s operational controls be sound and effective; 75% reported that investors placed the same high values (‘important or very important’) on regulatory controls being sound and effective.

see detail: Alternative investment community embraces sound practices